Homeownership is often presented as a goal for which we all should strive – but it’s not the ideal residential solution for everyone. For some people, renting a home makes more sense in regard to finances and freedom. How do you know whether you should rent or buy a house?
Should You Rent or Buy a House?
A home is a major purchase, so deciding whether or not to buy one is a major decision. What motivates people to buy a home? According to the National Association of Realtors’ 2016 Profile of Home Buyers and Sellers, the primary reason that buyers most often cited for buying a house was “the desire to own a home of their own.” However, as anyone who has suffered a stomachache after indulging in too much candy knows, simply wanting to do something doesn’t mean that you should do it. When you’re trying to decide whether you ought to rent or buy a house, take your time and consider the pros and cons of each option.
The Pros of Renting
Renting a home may not rate as highly in the public’s opinion as owning a home, but it does offer several advantages. For starters, renting doesn’t require the massive financial commitment that buying does. Renters aren’t expected to pay for maintenance or repairs to the home, and they don’t have to pay property taxes.
Of course, arranging for renter’s insurance is typically a smart choice, but it is generally much less expensive than homeowner’s insurance. There is also no need to worry about the possibility of declining property value, and renters have a far easier time walking away from a property than homeowners. As Investopedia points out, renters can easily choose to downsize at the end of their lease, but homeowners have to go through the process of selling or face foreclosure. The freedom to relocate can be especially valuable in a tight economy when people might want to move to find work.
The Cons of Renting
Everything has a downside or two, and renting is no exception. Have you ever wondered why people say that renting is like throwing your money away? It’s because people paying rent to live in a house do not build equity the way that homeowners do when they pay mortgage payments. Since they don’t own the property, renters also have to follow the landlord’s rules; they must seek approval for things like having a pet or making changes to the home. In addition, renters may find their rent surging as time passes. In fact, as the video above reports, renters are likely to see their rent increase with each new lease that they sign.
The Pros of Buying
Homeownership certainly has its perks. As Forbes explains, a home mortgage is rather like a forced savings plan. Each monthly mortgage payment allows homeowners to build equity, and that equity can be tapped to finance home improvements, college educations, retirement, and other financial challenges that might arise in the future. Homeowners can also take advantage of various tax incentives to reduce their tax burden. Finally, there is a chance that the property will increase in value over time and provide an excellent return on the initial investment.
The Cons of Buying
What are the potential downsides of buying a house? First of all, homeownership is expensive. Money Crashers notes that buying a house involves many upfront costs, and the financial responsibilities don’t stop once the purchase is made. Homeowners have to pay for property maintenance and repairs, and they are also responsible for property taxes and insurance costs.
In addition, owning a property restricts one’s flexibility since it anchors the owner to the location. Since you wouldn’t just be walking away at the end of a lease, it will be a lot harder to relocate, whether for a job, a school, or a family obligation. Selling a home can be quite a headache. Homeowners also run the risk that their property will decrease in value, especially if they purchase the property at a time when home prices are running high or they plan to remain in the home for a brief period.
Things to Consider When Deciding Whether to Rent or Buy a House
Deciding that you would like to buy a house doesn’t necessarily mean that you’re ready to do so. There are many other factors to consider, including the following:
- Monthly Expenses. Comparing the monthly costs of renting and buying can help you decide which makes better financial sense. An online calculator can help you see how your options stack up.
- Savings. Home buying often requires a substantial down payment, and you have to be financially prepared to maintain the home, so healthy savings are a must.
- Stability. Buying a home involves putting down roots. If a relocation is likely in your future, you may find the flexibility of renting a better fit.
- Duration. Whether you’re buying or selling, transferring ownership of a home is a complicated process that involves certain costs. Staying put will help offset those costs, and the longer you plan to stay, the better it is to buy.
- Satisfaction. How much satisfaction will purchasing a particular home give you? If circumstances forced you to stay there, would you be content to do so or regret the purchase?
Are you trying to determine whether you should rent or buy a house? Everyone’s situation is unique, so consider scheduling an appointment with a financial professional to discuss the details of your situation and gain expert insight into your options.
Finally, if you are ready to buy a house and you live in the Kansas City area, contact PrimeLending today. Our team is committed to helping you navigate the home financing process, so that you can purchase the home of your dreams. At our branches located throughout Kansas City, we can help you explore our wide variety of loan products and programs. Plus, PrimeLending utilizes delegated underwriting, local appraisers, and cutting-edge technology to accelerate the underwriting and closing processes. When you’re ready to learn more, please give us a call at 844-701-5626.